TaxTMI 
TaxTMI 
1969 (1) TMI 4
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....ling with this question, considered the provisions of section 10(2) of the Income-tax Act and held that the deduction claimed by the assessee was not admissible as it amounted to a penalty imposed on the assessee for his dishonest action in supplying sub-standard quality goods and, as such, it could not be said to be an expenditure incurred wholly and exclusively for the purpose of his business. The facts and circumstances in which the question was referred to the High Court are these : During the calendar year 1954, which was the year previous to the assessment year 1955-56, the opposite party (hereinafter referred to as the "assessee ") worked as the paddy procuring agent under the Government of Orissa on the basis of an agreement enter....
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....he aforesaid question for opinion to the High Court who answered the same in the negative and against the assessee, that is to say, that the said sum of Rs. 25,700 paid by way of penalty by the assessee to the Government of Orissa was not an admissible deduction. There was an appeal from the said decision to the Supreme Court on a certificate granted by the High Court. The Supreme Court, by their judgment dated September 15, 1966, allowed the appeal and the case was sent back to this court for answering the question referred to in the appeal on the aspect as explained in that judgment. That is how this reference has come back to this court for hearing. The scope of the question which was referred to the High Court for decision has been exp....
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.... the question of the applicability of section 10(2)(xv) of the Act at all, and should have confined itself to deciding whether this amount deducted from the claims of the assessee by the Government of Orissa was liable to be excluded when computing the income under section 10(1) of the Act. " After remand by the Supreme Court, the High Court is to now consider the question in the aspect as explained in the Supreme Court judgment, confined to the provisions of section 10(1) of the Income-tax Act, which reads as follows : " 10. (1) The tax shall be payable by an assessee under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him. " The....
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.... the facts found by the Tribunal and answer the question of law on that footing. Any departure from this rule of law will convert the High Court into a fact-finding authority which it is not under the advisory jurisdiction (Commissioner of Income-tax v. Calcutta Agency Ltd.). The relevant findings of the Tribunal in their order dated July 20, 1960, purporting to indicate the real nature of the transaction in which the assessee had to pay penalty are in paragraph 3 of the said order, which reads as follows : " We find that the Government had accepted the deliveries although, according to them, the supply did not conform to the (fair average quality) standard. Having not chosen to refuse the deliveries and having paid the assessee at the co....
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....livered not being of contract quality, breach of warranty, with the risk of liability to pay damage, should at times be committed and payment of such damages as a result of breach of warranty in the course of or as a consequence of earning profits and gains of business is incidental to the carrying out of the assessee's business as a paddy procuring agent ; it was an unavoidable loss arising as one of the consequences of carrying on such business. It is clear from section 59 of the Sale of Goods Act, 1930, that the remedy for such breach of warranty is that the buyer is not by reason only of such breach of warranty entitled to reject the goods but he may set up against the seller the breach of warranty in diminution or extinction of the pr....